Repo rate unchanged – What is the government thinking?

Further, understand once and for all what repo is and for what purpose. Bonus: You too can participate, learn how.
Repo rate unchanged – What is the government thinking?
Repo rate unchanged – What is the government thinking?
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Cash, credit or in other words liquidity is the lifeline of aneconomy. Also, inflation is an inherent characteristic of fiat economies. Afiat economy is one where the amount of currency (physical or digital) is notbacked by physical gold.

Now, growth and inflation need to be balanced. If inflationis allowed to increase at a high rate, then the currency of the nation losesits value and everything gets expensive by many multiples. On the other end, ifinflation is reduced, then the growth of the economy also becomes stunted andcan potentially de-growth or shrinking of the economy can happen.

However, the above discussion is not to mean that either ofthe extremes is desirable. No, a balance as per the current and the near-futurescenario is required. In India, this responsibility stands on the shoulders ofthe Governor of the central bank of India, the Reserve Bank of India (RBI).

At this point in time, Shaktikanta Das, the governor of RBIhas decided to keep the repo rate unchanged. The current value of the same is4%.

Not changing the repo rate indicates a wait-and-watchapproach by the central bank.

Usually the transactions of these commercial loans takeplace between RBI and commercial banks. However, retail investors and traderswill be allowed in the club too, with the government focusing on encouragingthe retail participation.

Retail Direct is the title of the scheme in which thegovernment will move from its traditional model of an aggregator to open upprimary and secondary markets (explained next) to retail traders. The accesswill be online just like trading in the stock markets is right now.

To explain technical terms, primary market is where theentity itself is selling the item and secondary market is where the originalentity being exchanged has no role and individuals and organisations tradeamong themselves.

The analogy from the stock markets would be that an IPO (InitialPublic Offering) is in primary market, while once the stock has been sold bythe company, secondary market takes over.

All in all, the central bank RBI is aware of the scenariosof the nation at this time and is handling the same.

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